Mobile money: where to start?

With the development of mobile money services around the world, getting paid with this new payment method becomes very attractive for a lot of businesses. And, if you are reading this post, it is likely that you think that mobile money makes indeed a lot of sense for you. Perhaps, you’ve even already had meetings with mobile money suppliers to understand how to proceed further.

The objective is to start receiving mobile money payments. So, how do you get there quickly and efficiently?

It’s not that easy…

Getting paid with mobile money can seem easy at first. You just have to open a mobile money account, give your company reference to your customers, and start receiving money, right?

However, when you start diving into the practicalities, the question becomes more complex. A lot of issues arise, such as:

Will my customers be annoyed or even worried if I ask them to pay using mobile money?

Do I need to provide incentives to my customers to pay for my service using mobile money?

How can I get notified of payments?

What happens when a client makes a mistake during the payment?

Can I rely on the existing mobile money agents’ network?

Should I register my own salespeople as mobile money agents, so as to allow them to make the transfers themselves, and ease the job of the customers?

How can I integrate mobile money into my accounting software and processes?

And new questions keep popping up…

The six steps of a mobile money project

However complex the problem may sound, any mobile money project usually follows a set of standard steps:

Negotiate and sign a contract with one or more mobile money supplier(s)

In this series of articles we are going to cover all these steps, starting with the first one: negotiating and signing contracts with the mobile money suppliers.

First, let’s understand the mobile money suppliers

The first thing is to understand how the mobile money industry works in your geographic area. For this, you should meet with the mobile money suppliers in your market. In Cambodia, for instance, you would meet with Wing, the leading supplier in the country, and a few others. In Kenya, you would get in touch with M-Pesa, MTN and Airtel, for instance. In my experience, they’re usually quite open to meet with new potential partners.

If you’re like me, what you’d like to know at this early stage is how much it is going to cost you, and what the integration options will be. Unfortunately, it is unlikely that you will get a quick answer to those questions.

Indeed, in most markets, there is no standard pricing or standard technical integration offer yet. Usually, the mobile money suppliers will be interested in understanding more about your business case. For instance, they would ask you questions like:

What is your current amount of transactions?

How many transactions per month do you plan to have?

What is your expected growth?

What is the average size of transactions?

In other words, they want to assess the commercial potential of your future relationship, before giving you practical answers and making a proposal.

This can be a bit disappointing, but from their perspective it makes a lot of sense. It is therefore important to go into those first meetings with reasonable expectations.

How much does it actually cost?

What you need at this stage to start building your business case is to get an idea of the costs involved. Regarding the transaction costs, mobile money suppliers usually offer one of these three solutions:

They can ask for a percentage of the transactions – usually between 0.5% and 2%.

They can ask for a fixed amount per transaction – usually between $0.1 and $0.5 per transaction.

They can ask for both, i.e. a percentage and a fixed amount.

In addition to the transaction costs, the notification of customer payments can be subject to another set of fees, which we will cover in a future article.

So, what should I expect?

In average, I would say that the transaction fee to expect to pay at first usually goes between 1% to 2%. It can also often be renegotiated at a later stage when volumes are higher.

For instance, in the projects I have been working on, after negotiation we always managed to reach a fair agreement with our mobile money partners. When the transaction size was significant, we agreed for instance on a fixed fee per transaction. This would typically represent around 1.5 per cent of the average transaction size. In other cases, we agreed on percentages ranging from 1 to 1.5 per cent.

In terms of negotiation, I would have two pieces of advice for you:

If the first offer they make does not work for you, just tell them! For instance, if the mobile money pricing model is $0.2 per transaction, but you expect weekly transactions of $2 per customer, this would not be a sustainable option for you. It would indeed capture 10% of your revenue, which is too high. In a case like this, just explain the situation to your mobile money supplier and work on finding a mutual ground.

During the negotiation, don’t forget to emphasize the scale of transactions you are going to bring in the future. Typically, it means avoiding the word “pilot” during the discussion!

To conclude

We are small players, and, during the initial stages, we usually bring low volumes of transactions to the mobile money suppliers. On the contrary, our mobile money partners are much bigger corporations. Depending on the country, mobile money might even not be their core business. However, they understand very well the potential of those new payment methods, and are often willing to work with us to build scalable business cases. To be realistic, we have to accept to start small, and sometimes to do things that don’t scale at first, but that will get the relationship started.